The internet is becoming the revenue stream of the future, bringing unexpected sales resurgence opportunities to mature industries. As businesses become more and more accountable for their online success, they need the right metrics to measure, track and improve performance.
However, the current web analytics industry is fragmented on many facets, making it difficult to compare data across channels. Specifically, everyday web metrics are defined differently by the multitude of web analytics' vendors. This poses a challenge for the full optimization of web business channels due to the incompatibility of results achieved through the different metrics provided by competing analytics' vendors.
But hope springs eternal. The Web Analytics Association, consisting of analytics' industry thought leaders and headed by Jim Sterne and Bryan Eisenberg, has incorporated within its long-term goals the task of establishing industry standards.
"By recommending standards, definitions and terminology, we can collectively enable common ways of looking at data measurement and methodologies, resulting in:
- More meaningful industry benchmarking
- Comparability of results among different tools
- Better understanding of the metrics terms we all use."
Web analytics standards
It is my belief that standards in web metrics will take the U.S. internet economy to the next level. It's safe to assume from a manufacturing standpoint that China has surpassed the United States: The growing trade deficit is proof positive. Within the next decade, China's internet penetration will be the world's highest. However, the internet has always been our core competency. We helped create it, we had a hand in revolutionizing it, and I believe we can maintain our leadership.
The first step is creating the standard metrics that can be used to effectively measure the profitability of online businesses. Sterne has the following to say about progress so far: "Getting consensus across industries about definitions and calculations turns out to be a big job.
"Fortunately, enthusiastic volunteers are tackling the issues. In the meantime, companies are finding excellent competitive analysis at the hands of companies like comScore, Hitwise, and Nielsen/NetRatings."
Competitive analysis can help eliminate the current confusion caused by the different metrics and labels provided by various vendors. How many times have you been asked during a KPI report presentation of the CEO/CMO variety, "What's the industry average?" Corporate leaders ask this question because they are used to traditional competitive benchmarking.
Competitive benchmarking is a powerful tool that is used by every bricks-and-mortar business to compare its financial performance to that of its competitors. Competitive benchmarking can tell you how effective your current business processes are and is often the driver behind business decisions.
Management has the tough role of managing a company's scarce resources, and benchmarking can help managers allocate more efficiently. However, measurements like liquidity ratios and profitability ratios do not reveal how effectively your business is performing online compared to your closest competitor.
Key performance indicators
Online, it's your key performance indicators that help drive your online business decisions. These are the indicators we strive to optimize, and without these competitive benchmarks, it can be easy to reach the plateau of diminishing returns. You may believe that your current cart conversion rate is good, but relative to what? Benchmarking can answer this question and allow you to optimize your conversion funnel for better performance.
With metrics in place, you'll be able to benchmark to see just how well your online business is performing. Competitive benchmarking unlocks a desire most of us share: to be the best. Being number one comes with a price tag, however, requiring that you allocate the necessary resources to trigger and maintain success. Savvy businesses will invest in tools that optimize their online presence, beginning with web analytics.
While your CEO appreciates a respectable cart conversion rate, he will appreciate it more if it's better than your competitor's. Managers will soon realize that in order to remain competitive online and ahead of the benchmark, they need to continue investing in web-optimizing solutions, and among the most important is web analytics. As the online business channel continues to grow, managers will be delighted to see that their initial investments yield a positive cash flow.
Some people have a tough time defining web analytics. I did too, until a web analytics colleague defined it this way: "Web analytics is accounting for the web." If that's true, then we must set a standard.
Thomas Carrillo is a web analyst at Red Door Interactive. .